Labour's top brass need to show more ambition

The Labour Party's apathetic attitude to the position of general secretary is indicative of a wider

Yesterday morning's scoop by Dan Hodges on Chris Lennie becoming the next General Secretary of the Labour party has sent the blogosphere a flutter. Labour List editor, Mark Ferguson, has argued that a more transparent selection process is necessary. Johanna Baxter has called for the National Executive Committee, of which she is an elected member, to make the decision on the basis of merit. And outgoing Fabian General Secretary, Sunder Katwala, has detailed why the decision will be a test case for the more open approach that Ed Miliband called for in Wales on Saturday. But the most depressing part of Dan Hodges piece is the view expressed by one party official that: "Chris [Lennie] is coming in with one brief and one brief only. Cut costs and sort out the finances. That's it."

If this is true, it shows a remarkable lack of ambition from Labour's top brass on the role of the General Secretary. Sorting the party's finances is absolutely critical but so too is reengaging the party with the public, the subject of Ed's speech on Saturday. As Rachel Sylvester argues in today's Times, political parties "must loosen up or lose out".

Without an advocate in Victoria Street for the "cultural glasnost" that Nick Anstead and I called for in our 2009 Fabian pamphlet, "The Change We Need", Labour will fail to consolidate its recent increase in membership or roll out the best practice in grassroots campaigning which has been seen in a handful of local parties. There are a lot of good ideas bubbling around Labour's grassroots. The Labour Values website documents terrific examples of activist recruitment in Birmingham Edgbaston, community meetings in Blackburn, and effecting canvassing techniques in Bethnal Green and Bow among many others. But this best practice will be lost if the party does not make its roll out to the rest of the country an explicit goal of the party (and therefore of the General Secretary). Indeed, many of the reforms that Ed himself advocates are likely to be lost without someone at the top of the organisation devoted to their implementation.

But even if the cutting of costs and sorting of finances was the only role expected of the next General Secretary it would make little sense to limit the field to a veteran of Victoria Street. The Labour party has struggled with its fundraising since the cash for honours incident. High value donors had been falling away long before some disappeared in protest at Ed Miliband's election, the 1000 club (composed of donors making £1000 contributions per year) is understaffed and therefore not maximising its potential to raise cash, much of the party's additional short money has been wasted on two special advisors for each shadow cabinet member, and the effort to raise cash through online appeals from the grassroots has suffered from a degree of flat footedness especially since the general election. In all of these areas, there is much that can be learned from the charitable sector, from online campaigns, and from the US. Chris Lennie may the best candidate for the job but why narrow the field at this stage?

Important though it was for Miliband to call on Saturday for Labour party conference to be "legitimate in the way its decisions are made", it will be worth nothing if other decisions of critical importance are made behind closed doors. In addition to Mark Ferguson's important list of questions for the party and its leadership, the membership and public have a right to know the criteria for the selection of General Secretary and the composition of the short-listing panel. After going back on his support for an elected Party Chair and doing little to advance the cause of primaries that he used to endorse, Ed Miliband is on shaky ground as someone committed to modernising the party. He needs to act quickly to show that his words on Saturday were worth something.

Will Straw co-edited with Nick Anstead the Fabian Society pamphlet, "The change we need: what Britain can learn from Obama's victory". He writes here in a personal capacity.

Will Straw was Director of Britain Stronger In Europe, the cross-party campaign to keep Britain in the European Union. 

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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation